Currently, operators can share and trade spectrum so long as the resultant pool of airwaves is not beyond 25% of the total airwaves allocated in the service area.Anandita Singh Mankotia | ET Bureau | November 20, 2015, 08:45 IST

NEW DELHI: The Telecom Commission has decided to change the way total bandwidth in a circle is calculated, effectively allowing telcos to hold more airwaves and paving the way for much-needed consolidation in an industry hit by cutthroat competition.

The commission, the highest decision-making body of the telecom department, has decided that all airwaves 'available' with the telecom department (DoT) and subsequently put to auction should be counted towards calculating the total amount of airwaves for the purpose of arriving at spectrum caps. But any bandwidth that has been assigned for non-commercial use should not be included in the calculations.

Moreover, the government must also add the airwaves, which were surrendered or returned by telecom operators, a major change from the current formula that deducted airwaves that a telco returned to the government from the auction pool, thereby tightening spectrum holding limits.

"Irrespective of whether telecom operators buy the airwaves or it remains unsold, if the airwaves are available with the DoT and have been put up for sale, it must be counted," a senior government official privy to the commission's meeting last week told ET.

While the industry-friendly decisions need to be cleared by Telecom Minister Ravi Shankar Prasad, it's unclear if these need Cabinet ratification. Typically, all policy changes with financial implications need to go to the Cabinet.

The Telecom Commission's decision will cheer a telecom industry struggling with intense competition over the years among as many as 8-10 operators in some circles, which has hurt revenues and profits. Even the spectrum sharing and trading rules, notified recently, haven't led to much activity so far due mainly to the current spectrum cap rules, which prevent likely buyers such as market leader Bharti Airtel and No. 2 ranked Vodafone from topping up their bandwidth holdings in certain areas.

As reported by ET earlier, the spectrum caps affect Bharti Airtel the most as they prevent it from buying additional bandwidth in circles where it holds spectrum across various 2G, 3G and 4G bands. It had even challenged the spectrum cap rules in court prior to the March auctions, saying that with state-run BSNL and MTNL returning chunks of airwaves to the government, the total amount of airwaves thus allocated to telcos had been reduced. This reduced pool of bandwidth meant Bharti Airtel hit the spectrum holding cap in several key circles such as Karnataka, Delhi and Mumbai.

"Expanding the definition of the amount of spectrum to be included is another way to make headroom for a consolidation and would be a welcome," said Rajan Mathews, director-general of the GSM industry body Cellular Operators Association of India.

Currently, operators can share and trade spectrum so long as the resultant pool of airwaves is not beyond 25% of the total airwaves allocated in the service area and not more than 50% of the airwaves allocated in that particular frequency in the service area.

The Telecom Commission, however, has specified that any spectrum that is assigned by the government for non-commercial purposes such as any assignment to defence forces, should not be taken into consideration while calculating total bandwidth in a circle.

"The commission meanwhile has sought clarity from the regulator on how to cap airwaves in times when the government assigns spectrum for non-commercial purposes such as defence," the official added. The regulator will be asked to specify if it will be feasible to go for dual spectrum caps in such cases.

"Should existing spectrum holding of operators be protected? Going by the previous recommendation of the regulator, there is no fault of the operator in case some airwaves in a specific band are allotted for non-commercial use," the official explained.

"If yes, should then there be two spectrum caps, one declared at the time of auction and other published as soon as some spectrum is assigned for non-commercial use?" he added.

The official added that this could again open issues pertaining to a level-playing field.

Separately, RCom initiated contempt proceedings in the apex court against the Department of Telecommunications, blaming it for delaying a spectrum sale that would have enabled dues to be paid to Ericsson and lenders.